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Chile Monetary Policy July 2021

Chile: Central Bank delivers first rate hike since the pandemic began in July

At its 13–14 July meeting, the board of the Central Bank of Chile decided to hike the monetary policy rate to 0.75% from 0.50%, which had previously marked its lowest point since 2009.

A stronger-than-expected performance of the economy and mounting inflationary pressures were behind the Bank’s move. May’s index of economic activity showed output was back to its pre-pandemic level, supported by sustained private consumption amid sizable fiscal transfers and withdrawals of pension savings. Meanwhile, headline inflation climbed to 3.8% in June, partly due to the behavior of fuel prices, while core inflation remained above 3.0% and inflation expectations rose further.

Moving forward, the Bank stated that, despite the hike, the monetary policy stance will remain expansionary and that the monetary policy rate “will be below its neutral value throughout the two-year policy horizon”.

The next monetary policy meeting is scheduled for 31 August.

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